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CU System Archive

CU System

Fear anger prompt flight to Seattle CUs safety

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SEATTLE (2/5/09)--Members are moving into Seattle's credit unions to find a safe haven for two reasons: fear and anger (Crosscut.com Feb. 4). A wave of credit union memberships arrived on the heels of fear when Washington Mutual, which was based in Seattle, collapsed. Another wave arrived when consumers became angry about Wall Street financiers' actions in the financial system turmoil. Boeing Employees CU (BECU) told Puget Sound Business Journal the credit union experienced a 50% increase in membership growth during the last half of September, the article reported. "The ways in which credit unions differ from banks are especially appealing right now," said Crosscut.com. "Credit unions are less vulnerable than commercial banks to market swings, and they don't pay mega-bonuses to executives or fly bigwigs around in corporate jets." It also noted they're not involved in subprime lending and are less likely to inflate appraisals; deposits are federally insured up to $250,000 and they're more familiar, which is comforting in economic turmoil. John Annaloro, president of the Washington Credit Union League, added that membership is increasing because credit unions concentrate on consumer loans, credit cards and residential mortgages, are jointly promoting sales with automobile dealers. And Whatcom Education CU said credit unions remain strong because members and boards aren't driven by profit. Instead they are driven by a sense of community, good service and other intangibles. They also are limited in risk-taking. Despite the growth, the article said, credit unions are preparing for harder financial times ahead, setting aside funds for future loan and lease losses. To view the entire article, use the link.

CSMC sues founder former execs for racketeering

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WAUWATOSA, Wis. (2/5/09)--Central States Mortgage Co. (CSMC), one of Wisconsin’s largest mortgage bankers--partially owned by credit unions--is suing its founder and four other CSMC executives for racketeering and allegedly defrauding the company of at least $15 million. CSMC, founded in 1992 by Richard Jungen, also does business in Illinois. In 1997, the Wisconsin Credit Union League Service Corp. and 13 state-chartered credit unions in Wisconsin and Illinois acquired 53% of CSMC shares (Milwaukee Journal Sentinel Feb. 4). The remaining 47% of CSMC shares were held by Jungen and other former employees. Since 1997, the credit unions have acquired 72% of the shares. The Jungen group controls the rest. Jungen and others created Interim Funding--a limited liability corporation--that provided bridge loans to credit unions and sold them with CSMC. Jungen and the other defendants did not reveal their involvement in Interim to other CSMC officials, the suit alleges. Jungen was fired July 31, the lawsuit indicated. The others named in the suit were terminated within a few months. The lawsuit claims the $15 million in losses were the result of a conspiracy to shift distressed mortgage loans to CSMC from Interim, and that the transfer constituted a pattern of racketeering, including at least three instances of wire fraud and a breach of fiduciary duty.

CU System brief (02/04/2009)

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* HARRISBURG, Pa. (2/5/09)--Norb Kaczmarek, CEO of Erie (Pa.) FCU, and Ray Brunner, president/CEO of West-Aircomm FCU, Beaver, were re-elected to their seats on the board of the Pennsylvania Credit Union Association (PCUA). The announcement was made by PCUA Chair Diana Roberts (Life is a Highway Feb. 4). Kaczmarek will represent District 1 and Brunner, District 2. Neither nominee was opposed in the election. Candidates for a District 4 seat held currently by Lanny Horn of AK Valley FCU, Lower Burrell, are: Maria LaVelle, CEO, Westmoreland Community FCU, Greensburg, and A. Eugene Nagle, board chair of Allegheny-Kiski Postal FCU, New Kensington. Member credit unions in District 4 will receive ballots for that election by March 1 …

MCUA to distribute half million to its CUs

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ST. LOUIS (2/5/09)--The Missouri Credit Union Association (MCUA) board voted Tuesday to distribute $500,000 to affiliated credit unions “to help member credit unions address issues surrounding the volatile economy and stimulate growth.” The funds will be distributed to credit unions based on their dues. “Missouri credit unions have a long history of working together,” said board Chair Betty Clark, CEO, United CU, Mexico. “We have a strong, well-supported association, and as a board, we feel it is appropriate to assist member credit unions in these difficult economic times.” “The high affiliation rate of the MCUA is a testament to the association’s value proposition and member focus,” said board member Dennis Pierce, CEO, CommunityAmerica CU, Kansas City. “In this unprecedented time in our history, unity is paramount,” said Rosie Holub, MCUA president/CEO. “Credit unions need the support of their league and, as represented by this action, we understand the pressures and demands credit unions face financially. “The credit union system is facing a wide range of challenges from helping credit union members withstand the economic downturn to making certain we have a strong voice in the state assembly, in Congress, and with our regulatory agencies,” she added, commending the board for its action. Holub also reported that the board voted to recommend to membership at the 2009 annual business meeting that membership fees remain at the reduced 2009 level again for 2010. The reduced membership fee schedule was originally proposed at the MCUA 2008 annual business meeting. The reduction in fees represents another effort to assist credit unions in holding the line on expenses. MCUA management also announced Tuesday that the organization’s product and service focus in 2009 centers on three areas most critical to credit unions in the coming year: maximizing credit union income, reducing credit union expenses and minimizing risk.

Wisconsin banks CUs vying for market share

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MADISON, Wis. (2/5/09)--The Wisconsin Credit Union League's new Credit Union House located across the street from the State Capitol will command a front-row view of the struggle for market share of about $180 billion in assets held by Wisconsin's financial institutions, according to a Madison, Wis. newspaper. In 1990, credit unions counted 8% of total assets held among the state's financial institutions. Market share was 13% in 2003, but has since dropped closer to 10%, said Madison.com (Feb. 3). Since 2003, credit unions grew in assets 39% to $18.3 billion--less than the combined assets of Wisconsin's two largest banks. Assets in banks grew nearly 80% since 2003, to $158.9 billion, but the state's Department of Financial Institutions (DFI) maintains that the bank growth is just "normal growth patterns" and not extraordinary. Bank deposits grew at about the same 4.5% rate in 2006 and 2007. The article quoted Wisconsin Credit Union League President/CEO Brett Thompson, who discussed the new location and notes that membership in credit unions has grown. It also interviewed members of Heartland CU who moved their accounts from a bank to the credit union because of customer service. "The bank just kept charging more fees. They even wanted to charge me a fee to close my account," they said. Dean Wilson, CEO of Focus CU, Menomonee Falls and league chairman, told the newspaper that in today's economic times, credit unions have proved they offer a safe haven for consumers, "especially those whose financial needs are too small to drive corporate profits." In the article, a spokesman for a banking association took the opportunity to attack credit unions' tax-exemption status and service of people of "modest means." League spokesman Chad Helminak noted that credit unions' goal is "providing savings to all working people regardless of income." The article also discussed history of the credit union movement, including the Credit Union National Association. Use the link for the full article.

11 CUs aid Calif. workers in budget stalemate

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SACRAMENTO, Calif. (2/5/09)--California State Controller John Chiang announced an agreement Tuesday with 11 credit unions to provide lines of credit to Californians impacted by the state’s cash crunch, which has forced the controller's office to delay an estimated $3.3 billion in payments during February. “Without corrective action from the governor and legislature, this cash crisis will continue indefinitely,” Chiang said. “I applaud those in the financial services community who are stepping up to help Californians in a time of tremendous need.” Eroding revenues and a chronic structural budget deficit have depleted the state’s cash reserves. On Sunday, the controller’s office began delaying payments to preserve cash flow and make payments required by the state constitution, federal law or court rulings. Eleven credit unions collectively pledged at least $22.4 million to meet the needs of their affected members. They are:
* Alliance CU, San Jose, $250,000; * American First CU, La Habra, $1 million; * Cal State L.A. CU, Los Angeles, $1 million; * Central State CU, Stockton, $1 million; * Firestone Financial Services CU, Anaheim, $100,000; * First Entertainment CU, Hollywood, $5 million; * Health Associates FCU, Orange, $300,000; * SF Police CU, San Francisco, $250,000; * Stanford FCU, Palo Alto, $5 million; * Visterra CU, Moreno Valley, $1 million; and * Water and Power Community CU, Los Angeles, $7.5 million.
Other credit unions and banks have indicated they will--to the extent possible--provide lines of credit and other short-term borrowing solutions on a case-by-case basis to those affected by the cash crisis. The California Department of Finance promised to make available additional special funds for borrowing to pay small businesses on time in February. While these businesses represent a small portion of the state’s private sector contracts, the businesses face penalties up to 92% for each missed payment when a budget is in place.

Carolina CUs thrive in tough market

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CHARLOTTE, N.C. (2/5/09)--Carolina credit unions are toughing out the nationwide financial crisis. Sharonview FCU, Fort Mill, S.C., grew its deposits by 13% in 2008. The credit union also added $100 million to its assets, ending the year with $957 million (Charlotte Business Journal Feb. 2). Credit unions are very conservative with what they do, said John Carlson, Sharonview president/CEO. Carlson is cognizant of members’ apprehension about the future. There is “a lot of pain” out there, but the credit union will approach this year conservatively, he told the newspaper. Some credit unions are boosting their loan loss provisions to cushion themselves. Charlotte Metro CU increased its loan loss provision to $1.25 million in 2008, the paper said. While credit union members are experiencing tough times, the Charlotte branch of Raleigh-based State Employees CU (SECU), is ready to help. Credit unions “have a great opportunity to do what’s right and step up and help our members,” said Jerry Harmon, SECU Charlotte branch manager. Credit unions can grab market share because smaller banks will have a harder time raising capital, said University of North Carolina-Charlotte banking professor Tony Plath. The bottom end of the market will go to credit unions, and they can increase commercial real estate and local business lending, he told the paper.

Invest in America reports 25000 vehicle sales

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LANSING, Mich. (2/5/09)--The Invest in America campaign closed an estimated 25,000 vehicle sales since the program went nationwide Jan. 7, CUcorp, a national credit union marketing company, announced Wednesday. Invest in America is credit unions’ auto loan discount program with auto manufacturers General Motors Corp. (GM) and Chrysler Corp. The program started in December with a four-state pilot program for GM and a 12-state pilot for Chrysler. The campaign includes contractual credit union member incentives from GM and Chrysler. GM is offering supplier pricing, which averages about $1,500 per vehicle, with its Credit Union Member Discount, and Chrysler is offering $500 or $1,000 rebates through its Credit Union Member Cash program. The nationwide program is on a 90-day pilot with GM and a 180-day pilot with Chrysler. All 8,000 U.S. credit unions are eligible to participate in and market the program to nearly 90 million credit union members. Of the 25,000 car and truck sales in the program in January, 90% were accompanied by credit union finance rates, David Adams, CEO of CUcorp and president/CEO of the Michigan Credit Union League, said in a conference call Wednesday. The program is on pace to generate 300,000- to one-million vehicle sales for GM and Chrysler by the end of the year, Adams said. This could result in a $12.5 billion sales boost for the auto manufacturers, and with 90% of the financing at credit unions, it would create a $10 billion loan surge for credit unions nationwide, he added. “There is $160 billion of liquidity as of September 2008 for credit unions nationwide,” Adams said. “About $80 billion is available for Invest in America. It’s projected that this could generate 3.2 million auto sales for GM and Chrysler.” So far, about 1,000 credit unions nationwide have participated in the program and 26 state credit union leagues are supporting it, he added. Credit unions’ market share of auto-loan financing has grown to more than 21% in December from 14% in March, according to Autocount, a national vehicle sales reporting company. Credit unions have shown strong loan growth and auto loan growth during the fourth quarter of last year. Fourth-quarter data are available for 20 of the largest U.S. credit unions, Adams said. “Loan volume has surged,” he said. “Some credit unions posted annualized growth rates of 20% in the fourth quarter. Loan growth is occurring across the board for these credit unions, including new car loans.” “Invest in America” also is a vehicle for membership growth, Adams noted. “In 2008, credit unions added two million new members on an existing base of 90 million,” he said. “Also, six of the 20 largest U.S. credit unions experienced membership growth in excess of 10% in 2008. “Invest in America should be a significant stimulus for the U.S. economy,” Adams concluded.

Citadel boosts arson relief fund by 20000

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THORNDALE, Pa. (2/5/09)--Citadel FCU has increased its contribution to an arson relief fund by $20,000 to assist victims of a rash of fires in Coatesville, Pa. The Thorndale, Pa.-based Citadel opened the Coatesville Family Fund after street fires on Jan. 24 destroyed 15 rowhouse homes. So far this year, 15 separate fires have been started in the area by arsonists. "Many members of our credit union have been affected by both the physical destruction of these meaningless fires as well as the continuing fear that they have caused," said Jeff March, Citadel president/CEO, who noted donations came from all around southeastern Pennsylvania. Citadel, which has more than $1 billion in assets, has created a webpage dedicated to the Coatesville Reward Fund. For more information, use the link.

UNFCU staffer receives NCUA award for service

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ALEXANDRIA, Va. (2/5/09)--National Credit Union Administration (NCUA) Vice Chairman Rodney E. Hood honored Timothy Challen, United Nations FCU (UNFCU) business development officer, with the Vice Chairman’s Award for Distinguished Service Jan. 30 in Geneva, Switzerland.
National Credit Union Administration Vice Chairman Rodney Hood (left) presented Tim Challen, United Nations FCU business development officer, the Vice Chairman’s Award for Distinguished Service. (Photo provided by the National Credit Union Administration)
“For his commitment and perseverance, Tim Challen truly personifies the credit union mission of ‘people helping people,’” Hood said. “After being shot by armed robbers in Nairobi, Africa, while working to open and establish a UNFCU office in East Africa, Mr. Challen made the decision to address the crime using positive change. “Through courage and dedication to a vision of a brighter future for the citizens of East Africa, Challen turned his vision into reality as founder of the Kilimanjaro Initiative,” Hood added. Using the positive impact of sports on youth and society, the Kilimanjaro Initiative provides the youth of East Africa with opportunities to take a constructive role in their communities. UNFCU, based in New York, has $2.6 billion in assets.